advantages and disadvantages
advantages
- cheaper for short term borrowing: credit cards can be cheaper than a personal loan for short term borrowing - interest is only paid on the remaining debt, not the full loan amount.
- greater flexibility: you only need to pay a minimum amount each month or you can pay up to the total outstanding amount.
- no redemption penalties: paying off a loan early can result in redemption penalties.
- interest free credit period: typically, up to 56 days interest free credit can be obtained.
- remote purchasing: enables you to purchase products and services remotely via the internet or phone.
- additional benefits: many cards offer additional benefits such as additional insurance cover on purchases, cash back, air miles and discounts on holidays.
disadvantages
- expensive cash withdrawals: withdrawing cash from a cashpoint can be very expensive.
- insufficient credit limit: you may not be able to obtain as much credit as you want.
- easier to get into debt: can encourage the purchasing of goods and services you cannot really afford; supports a 'buy now, worry later' mentality.
- open to fraudulent use: using a credit card, especially remotely, introduces an element of risk as the card details may fall into the wrong hands resulting in fraudulent purchases on the card. more on fraud
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